Capital markets 710. In Tanzania, capital markets are regulated by the Capital Markets and Securities Authority (CMSA) while the DSE is the only formal trading place for securities. The existence of capital markets in a country implies a greater potential for promoting corporate governance laws and standards since publicly traded companies are usually under greater scrutiny for transparent accountability, given their public nature, as opposed to private (nonpublicly traded) companies. There are currently only eight listed companies, two of which are not incorporated in Tanzania. Thus, only six Tanzanian based companies are listed and can demonstrate the high governance standards demanded by capital markets regulations. Investment incentives 711. The 2012 Index of Economic Freedom ranks Tanzania in the 110th position and under the category of “mostly unfree”. Although Tanzania’s financial markets were modernised over the past 10 years and credit to local enterprise is gradually increasing, these gains were offset by an under- developed legal framework that interferes with regulatory efficiency and trade policies. 712. The Tanzania Investment Act (Act No.26 of 1997) attracts investments to Tanzania by creating very conducive conditions under certificates of incentives that allow investors exemptions from taxes levied under the Income Tax Act of 1973, the Customs Tariff Act of 1976 and the Sales Tax Act of 1973. These tax exemptions are unconditionally granted under section 21. Under section 19 (1), any amendments to the Act shall not be made to the detriment of the investor enjoying the benefits thereby provided. Such benefits include, for example, unconditional transferability through any authorised dealer bank in any convertible currency. As argued by ‘The Africa Mining Vision’107 the serious repercussions of these “special incentives” offered to mining companies is the reduction of the share of rent on which African governments depend to fund their social, infrastructural and developmental programmes. Foreign investors in the gold mining industry 713. Gold mining is the fastest growing sector of Tanzania’s economy. According to the report titled “A golden opportunity: How Tanzania is failing to benefit from gold mining” by Mark Curtis & Tundu Lissu 2008, minerals now account for nearly half of national exports and Tanzania is Africa’s third largest gold producer. Paradoxically, ordinary Tanzanians are not benefiting from this boom because the Government implemented tax laws that are overly favorable to multinational mining companies. The CRM noted the growing public perception that Tanzania is being plundered of its natural resources and wealth. Between 1997 and 2005, Tanzania exported gold worth more than $2.54 billion. In the same period, Government received around $28m a year in royalties and taxes on these exports, amounting to just 10 per cent over the 9-year period. The 3 per cent royalty brought government only an average of $17.4m a year, in recent years. The Report argues that raising the royalty to for example 5 per cent would have increased government revenues by an estimated $58 million over the past five years. 714. The key challenges associated with the gold mining industry in Tanzania, include: (i) It provides government with low tax revenues; (ii) it is subject to minimal governmental and popular democratic scrutiny and is largely associated with corruption; and, (iii) people living in the gold mining areas, and Tanzanians in general, hardly benefit from these activities. 715. During CRM interactions with stakeholders in the regions, the above-mentioned challenges were confirmed. There was a general consensus that not only did the mining companies pay very low taxes, but that the practice had been going on for decades. Stakeholders complained about lack of development in the gold mining areas and the fact they were becoming more destitute owing to the massive appropriation of arable land with insufficient compensation or relocation. 716. The issue of environmental sustainability is another major concern regarding gold mining in Tanzania. This is discussed in detail in the following section (Objective 2). 107 The African Mining Vision is a publication of the African Union, February 2009 147